What are Sustainability Reports?

The recently deceased Ex Director of the GRI (Global Reporting Initiative), Ernst Ligteringen, responded to this question in a previous interview with Jorge Emilio Sierra Montoya, BizzNews collaborator, on the subject of Corporate Social Responsibility (CSR).

What are Sustainability Reports?

By: Jorge Emilio Sierra Montoya (*)

The recent news of the death of the Ex Director of the Global Reporting Initiative -GRI-, Ernst Ligteringen, has shocked the entire world, especially individuals and organizations who are concerned with the issue of Sustainability. Mr. Ligteringen was known as one of the highest authorities on this important subject in many different countries and important international Companies around the world.

Of particular interest at this time, and as a tribute to a friend and teacher, the following interview that was conducted when Mr. Ligteringen was the GRI director is now being re-published. This text also appears in one of my previous books on Corporate Social Responsibility entitled: “New CSR lessons”.

Dual Strategy Impact

-J.E.S.: Based on the Global Reporting Initiative’s -GRI- guidelines, Companies are preparing their own Sustainability reports. What are in these reports?

-E.L.: They provide information on the impact of a Company through its products, services, and operations at an economic, environmental, and social level, which are precisely the three dimensions of sustainable development in a Company also known as the triple bottom line.

– But this is not the only aspect to consider. A Dual Strategy is also important, right?

-Precisely. Because not only the impact to the Company is observed, but also how it’s affected by the economic, environmental and social surroundings. In reality, this is a dual strategy.

-What is the difference between the traditional financial and social statements (that include, on some occasions, the environmental aspects) of the Sustainability reports?

-I repeat: the reports identify the most relevant aspects of the environmental, social, and economic performance of a Company; on the other hand, it demonstrates the challenges and the risks of the three levels related to the main corporate strategies. However, it explains, the Company’s performance in aspects related to the use of natural resources, which is environmental; the relationship with employees and other Socially Responsible groups, or human labor rights, which is social, including a generated value, which is economic.

– Are good financial results not enough?

-No. They are much more than that.

-Can you give an example?

-If a Company uses a lot of water in their production process, as in the case of the beer industry, it should be efficient in its use of resources for economic, environmental, and social reasons. Sustainability depends on these aspects among other factors.

Risks and Opportunities Assessment

– How many guidelines does the report have?

-About one hundred, although a good report chooses the Companies they consider most important.

– What is the purpose of the report?

-Above all, to evaluate the risks and opportunities of a Company’s future.

– How long does it take to make a report, and how much does it cost?

-The time and the cost depend on the size and complexity of the Company itself.

– Is the cost less than the benefits?

-That’s right. In time, you will note that the generated value is much higher than the cost.

– And a work team produces the guide?

-No. This is not something you can leave to just one department, like public relations for example. No. Those who take advantage of this process is because they integrate these steps into the Company with the formulation of strategies, monitoring results, the search for efficiency, and performance measurement.

– So, a measurement system is essential?

– What gets measured is what you can manage. If this process is not followed systematically, if the impacts are not observable, a business person runs the risk of blindness in a dimension that will become increasingly important to the Company.

– And how important is the dialog of a Company with Socially Responsible Groups?

– It is highly important because it helps a Company to identify its main themes, provides confidence to consumers or clients, and contributes to a Company’s reputation.

Strategic Plan and Guide

-Is it advisable for a Company to have a strategic plan in place before working on a guide?

-A strategic plan greatly facilities the development of a guide because the report is also part of the objectives, goals, and the vision of a Company. However, the process here includes dialog, data collection, and analysis. The environmental and social themes are equally strategic for the Company, whatever they may be.

-Is this something investors care about?

-Of course, because investors increasingly focus on whether a Company is part of the problem or part of the solution. Hence the importance of Sustainability in subjects such as energy crisis, food shortages, climate change, etc.

-Ultimately, how do you produce a guide for a Sustainable report?

-By focusing on good business practices. In fact, the GRI provides materials or required tools, but in each country, there are specialized organizations in methodology management, consulting, and, above all, Companies that have already applied and can share their experiences.

-How many Companies follow this process after producing the report for the first time?

-The majority. Around 98% based on statistics.

– What aspects should be covered in the guide based on the indicators?

-I insist: There is no need to cover the 79 indicators listed, but only those that have real meaning to the company, thereby focusing on the most important indicators. And, as the reader is selective, they will always search for answers to the most critical aspects in said reports.

-Should the entire Company work on the report?

-Not really. Although this is the final objective, you can begin with one department and slowly expand to the others.

The Largest Companies

-Where is the best place to start the report?

-The best way to get started is just to do it.

-But, how difficult is it? There are some who think the number of indicators is excessive.

-The number, as I mentioned before, can be reduced to share a simple chart that gives confidence and transparency to the reader. However, we do not want to simplify the process because we believe that it will not help the entrepreneur. In addition, the environmental and social issue is not that simple, and, on the contrary, is increasingly more complex. It is only now that we start to understand how to face problems in a Company like climate change, water, and energy shortage, and the use of natural resources…

-How many Companies have Sustainability reports?

-We don’t really know because this is a completely voluntary practice. The only thing we ask of those who use the guide is to inform us so we can learn from your experience. Today, there are around three thousand (especially the largest Companies, but it can apply to smaller Companies too) Companies. Of the largest one hundred Companies in the United States, 60% have Sustainability reports, and in Europe, 70% of the largest one hundred Companies also has this report.

-What are the specific benefits that this report generates?

-It helps to provide a Company with a competitive edge, to face the future with confidence and to produce, based on relevant data, whatever the market needs. At the end of the day, it should be able to predict, in the face of an unexpected event, any business information that investors, employees, and clients require. In other words, when they search for it, they should find it.

-Isn’t this a waste of time as some critic’s claim?

-Absolutely not! If this information doesn’t generate value for the company, why do it? Entrepreneurs should remember that we are in a world that suffers from permanent change, and Companies are not exempt; they should be asking whether or not these steps are convenient in the face of future changes. And if they are not ready or prepared, it may already be too late.

-In other words, the essential part of the report is that it brings value to a Company?

-Certainly! This tool has shown many Companies around the world that they can be competitive in the future and position themselves more fully in front of their clients, the market, and the investors. All of these aspects bring value to a Company.

The Best Practices

-In essence, is the GRI methodology the most reliable in the world to measure Sustainability, or, if you prefer, Corporate Social Responsibility?

-At this time, yes. It is the best practice in this regard.

-Is anything else missing?

-We can still advance much further.

-How?

-By means of, above all, the experiences or practices of the Company when they prepare their reports, including the group dialogs with Socially Responsible groups in civil society, the NGO, and academic sectors… Our guide should be more precise and explain in greater detail to Companies how they can monitor and improve their practices.

-Any new projects?

-We signed a Project with the IFC, a member of the World Bank Group, to review the subject of women in business, employment history, and behavior in society, knowing beforehand that they represent more than 50% of the client base, but not necessarily employees. There is increasing interest in the world to consider these aspects.

-And, what is this information used for?

-Well, Companies can find greater business opportunities. For example: There was a certain vehicle manufacturer that gathered a group of women to recommend the best design based on their needs. There was an enormous surprise because the design was very different from the groups that the producer usually consulted in such cases.

-So, Socially Responsible groups should be consulted?

-This is precisely the great business revolution in our current time.

-And in GRI this process has already been completed?

-We did it with our employees and the experience taught us a great deal. It allowed us to identify critical areas to formulate the appropriate strategies.